Monday, May 19, 2014

How Bad Is the Worldwide Whiskey Shortage? Not So Bad, Actually

Suddenly the media is awash with stories about a worldwide whiskey shortage. Most are exaggerated, many are poorly informed. Just Google 'whiskey shortage' and you will have no shortage of choices. It's on the editorial radar.

Any report you see that says or gives the impression that we are 'running out of whiskey' is wrong. We're not. There is a shortage affecting the trade, but what 'shortage' means to them is that producers and distributors are unable to fill some orders for some products some of the time. These 'outs' are generally short term.

For consumers, this 'shortage' is having either no effect or they occasionally find stores out of something specific they want to buy. These are brief, localized shortages of certain products. Nothing worse than that is coming either, although it may get a little worse before it gets better.

If you only drink one brand and that brand is one of the ones affected, you might feel very inconvenienced, but most of the people reading this are whiskey enthusiasts who like many different products. I have yet to hear of a whiskey enthusiast who went into a store and couldn't find anything he or she wanted to drink.

Maker's Mark is a good example. Not only is Maker's Mark on allocation, it has been on allocation for more than 20 years. (Allocation means that when a distributor places an order for a certain number of cases, Maker's Mark replies by telling them how many cases they can have according to the brand's allocation formula.) Supplies have gotten even tighter in the last three years, but how frequently is your primary watering hole completely out of Maker's Mark?

Part of the problem is that brands on allocation are allocated in part according to historic sales. Maker's Mark is a national brand but many brands are regional. W. L. Weller is a good example. Texas, where Weller has always sold very well, gets a lot of the Weller that's available. Recently people around the country have become aware of Weller as a Van Winkle alternative, so they're trying to find it in markets where Weller has not historically been sold. Retailers in those places, who have customers asking for it, can't get it from distributors because that city or state's small allocation sells out so fast.

Similarly, there are some very small brands that have always been in short supply, but you didn't know because you've never looked for them before. As American whiskey drinkers become more knowledgeable and go looking for the in-the-know favorites, shelves can empty fast. Producers will adjust but it may take several cycles.

And, of course, all of this talk about a whiskey shortage will prompt some extra buying, which will strain supplies even more.

Some people talk about the whiskey shortage and the barrel shortage as if they're part of the same problem, but there was no barrel shortage when the whiskey selling now was put away. The two shortages are unrelated.

The barrel shortage is mostly a problem for micro-distilleries. The big distilleries may not be able to get quite as many barrels as they want but they're getting a lot of barrels regardless, because they always have. Micros generally don't get their barrels from the same cooperages as the big guys. In some cases, micros are doubling or tripling their barrel orders as their businesses take off, and the small cooperages who supply them can't keep up. The big cooperages aren't in any position to help because their current, big distillery customers are taking everything they make, plus the big cooperages only make 53 gallon barrels while most micros use smaller ones.

The barrel shortage is mostly caused by a shortage of timber at the stave mills. Loggers have been unable to get enough trees cut and out of the forest, in part due to the recent long, harsh winter. It's not a tree shortage (there are plenty) or a cooperage capacity limitation, at least not at the big cooperages. Some have predicted this problem will last for as long as two years. It won't.

So, as a consumer, here is how you probably will experience the whiskey shortage. From time to time, you will go to the store intending to buy Old Frothingslosh, only to find them out of Old Frothingslosh. Maybe you will go to another store and they will be out of it too. The radical, earth-shattering solution?

Buy something else and come back in a month when Old Frothingslosh has been restocked.

This is a welcome call for calm after a lot of hype about the current whiskey shortage, some of which I do agree is overblown. However, I do want to highlight one problem for consumers that went unmentioned here -- while the shortage may not lead to empty shelves, it's certainly pushing prices up, particularly for older whiskies. That's bad news for whiskey lovers on a budget, which I'm guessing is most of us.

Little known fact: Cordic's Special Reserve is the *same* mashbill as Old Frothingslosh and is aged in the same warehouses, but usually on higher floors for less time. I've even heard some private label bottlings of Cordic's for Binny's were actually dumped from Old Frothingslosh barrels.

Those who remember Sir Reginald von Allegenhy and his beer will be happy to know you can buy it again in parts of Pennsylvania: Iron City, the original maker, brews it today in Latrobe, PA in the former Rolling Rock plant. Some good history and taste notes here:

http://www.beeradvocate.com/beer/profile/410/21465/

(Breski's in Harrisburg carries it, 30 can packs for a song).

Chuck, it seems to me though that average prices have risen steeply for bourbon in the last 10 years. Would this not denote a shortage, or at least point out the ambiguity of the term? When demand rises sharply and supply does not rise in proportion, is that not a kind of shortage..?

The key point is you will always be able to find something that meets your tastes at a "relatively" affordable price.

Electronic media has also heightened the shortage "mania" since people in various parts of the country can now report in real time about availability of desired products.

The one thing that I have never quite understood is why distillers and distributors don't respond more readily to changes in demand and adjust allocations accordingly. For example, reallocating some of the Weller from Texas to other areas.

I haven't been able to find Weller 12 in any of my liquor stores in the northern Chicago suburbs (Lake County) since around November, and they say they won't have it for at least a few more months... I understand the situation they are in, but it is still very frustrating!

For the mass media that until recently didn't give a tinker's curse about whiskey/bourbon (and are late to the party, so-to-speak), "shortage" of same means no more than that there's usually no Pappy or Weller to be found on shelves in the favored urban markets where they (media people) live and shop...thus a biased picture emerges.

Interesting--while familiar with allocation, I hadn't realized that it was based on historic sales/consumer reputation rather than current demand. So what you're saying is that I should consider stocking up on weller's before I move from Houston to Chicago at the end of June...?